Good Economic News

By Afternoon Jolt April 23, 2012

Today's Winner: The city of Seattle

The big three credit rating agencies—Standard & Poor’s, Moody’s and Fitch—gave Seattle their top scores today. Additionally, S&P  improved the city's outlook from "negative" last year to "stable" now.

The news—literally a rating of the city's bonding credit, but essentially a judgment on the local economy—sparked a lovefest at City Hall, with Mayor Mike McGinn praising the city council and with his potential 2013 rival, council member Tim Burgess praising McGinn.

In a blog post, Burgess wrote:

The excellent ratings validate our actions over the past several years to maintain a solid financial foundation. Despite the sluggish economy and significant budget cuts, the Council and Mayor, along with the Retirement Board of Administration and City employees, worked together to keep our fiscal house in order. The excellent bond ratings strongly affirm the course we have followed.

In a press release, McGinn added:

Our strong credit rating reduces the cost of borrowing for essential infrastructure improvements and saves taxpayers money. Last year, with the Council’s help, we built up our Rainy Day Fund, a tangible demonstration of our commitment to a financially prudent city budget. I look forward to working with the Council as we work to close our budget shortfall and provide long-term financial stability for the City.

Burgess called out three policy changes that secured the top-notch (Triple A and A1 ratings): Requiring a $2 million annual deposit into the city's rainy day fund; making city employees put a higher percentage of their salaries—11.01, up from from 10.03—into the employee retirement account; and, in another zap to city employees, lowering the city's interest rate payments on employees' retirement contributions.

Moody's themselves reported:

The high ratings reflect the city's fundamentally sound economic base despite the lingering effects of the last recession and modest growth in sales tax revenues, above-average socio-economic indices, sound financial management, narrowed yet satisfactory financial position, and a favorable debt position.

The stable rating outlook is based on Moody's expectation that the city will continue to manage its financial operations well despite narrowed financial reserves and the challenges posed by the slow recovery from the recession.

Though Moody's report does cite some "challenges," noting a "Reliance on economically-sensitive revenues for operations, which have not rebounded to pre-recession levels" and "Reserves [$3.4 million] remain somewhat narrow for a large Aaa-rated city. Moody's expects the city to continue conservative budgeting practices and adhere to policies established to replenish reserve funds."
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